Government launches proposals for the reform of labour relations

In April 2008, the Minister of Labour opened the third and last phase of the debate with the social partners on the reform of labour relations in Portugal, prior to the submission of the legislative proposal to the parliament. The document presented by the Ministry of Labour, which includes proposals on the revision of the Labour Code, is the basis for ongoing debate. This new and decisive round of discussions takes place two years after Portugal’s Green Paper on Labour Relations was published.

Background to the reform and main challenges

On 22 April 2008, the Minister of Labour and Solidarity, Vieira da Silva, presented to the social partners, represented at the Standing Commission for Social Concertation (Comissão Permanente de Concertação Social, CPCS), the document, ‘Proposals for a new consensus on the regulation of labour relations system, social protection and employment’ (Propostas para um novo consenso na regulação dos sistemas de relações laborais, de protecção social e de emprego). With this initiative, the government has launched the third phase of the reform of labour relations and the last round of discussions with the social partners, which will precede the presentation of proposals in the parliament, including the revision of the Labour Code.

The first phase focused on the analysis of labour relations in Portugal, the results of which were published in the Green Paper on Labour Relations ([Livro Verde sobre as Relações Laborais](http://www.mtss.gov.pt/docs/Livro Verde sobre as Relações Laborais.pdf)) in April 2006 (PT0606019I). The second phase focused on improving the analysis and defining recommendations, and the final results and proposals were published in the White Paper on Labour Relations (Livro Branco das Relações Laborais) in December 2007 (PT0706059I; PT0802029I). In both phases, the social partners set out their positions on the labour relations analysis and the proposals, and took actions to influence the direction of the reform of labour relations that is now entering a decisive phase.

According to the document presented by the Ministry of Labour to the social partners in April 2008, the main challenges for labour relations reform are the following:

• enhancing social dialogue;

• making the law more understandable, effective and stable;

• promoting greater self-regulation of the labour market, through collective bargaining;

• extending the scope of the reform, to include not only the labour laws but also social security, employment and training policies.

Goals and measures

The main goals of the reform are the following:

• to increase the adaptability of companies;

• to promote collective contractual regulation;

• to reform the legal system governing redundancies;

• to strengthen the effectiveness of labour law;

• to combat segmentation and precariousness and to promote the quality of employment, and to adapt and articulate labour law, social protection and employment policies.

Increasing the adaptability of companies

In relation to this goal, the reform considers measures on three issues: working time adaptability; parental leave; and vocational training.

Improving working time adaptability

The measures envisaged aim at improving and creating new forms of working time adaptability and regulating them mainly through collective agreements and/or workplace agreements. The new forms envisaged, which should be governed by collective agreements, are the following: a definition of annual ‘working time accounts’ (banco de horas) and a definition of variable daily and weekly working time limits; ‘concentrated schedules’ (horários concentrados) on certain days of the week, which would increase the number of rest days; and collective working time flexibility in the workplace.

Furthermore, the measures envisaged consider a shift from the traditional form of monetary compensation schemes, in favour of compensatory time off. Collective agreements will, therefore, need to define the forms of monetary compensation or compensatory time off due in the case of overtime worked. Collective agreements will also need to determine issues such as pay reduction in the case of absence, or compensation for absence by working extra hours, and the setting of periods of leave and holidays not required by law.

In addition, it is assumed that the government will remove from the Labour Code the regulations on the reduction of the maximum limits of normal working time periods, as well as the quantitative definition of part-time work.

Maternity, paternity and adoption leave

The government proposal aims to change the system of maternity, paternity and adoption leave, replacing it with an entitlement called initial parental leave (licença de parentalidade inicial). The proposal includes measures to increase fathers’ share of the leave, to reward extended parental leave as well as to offer greater protection to those working part time in order to take care of children.

Vocational training

The main goals in this respect are:

• to reform the ‘provision on training’ (cláusula de formação) – regarding the employment of young people without compulsory education or without professional skills. Planned reforms include more demanding objectives and making the provision more flexible;

• to strengthen the right to continuous vocational training and make it more effective.

Promoting collective contractual regulation

The government proposals presented under this label aim to overcome the perceived weakness and lack of dynamism of collective bargaining and to reinforce labour market actors’ self- regulation. There are four main issues: articulation between the law, collective agreements and individual labour contracts; legal duration of collective agreements; representativeness of employers associations and trade unions and effects on collective bargaining; and workplace negotiations.

In relation to the first two issues, the document basically incorporates the recommendations of the White Paper on Labour Relations (PT0706059I; PT0802029I). In relation to the representativeness issue, the document defines the objective of setting out a specific tripartite agreement in order to reach a common definition with the social partners in relation to the general, abstract, and permanent criteria for assessing the representativeness of employers and trade unions, and in order to define the effects of representativeness on the extension of collective agreements. In relation to workplace negotiations, the document proposes the creation of a legal framework allowing trade unions to delegate their bargaining power to workplace structures of collective representation, in companies with 50 workers or more.

Changing the legal regulation of redundancies

The proposal aims to maintain the existing rules in relation to the definition of just cause in the case of dismissals and the principle that the Labour Code regulations on redundancies take precedence. The changes envisaged regard disciplinary procedures, the effects of illegal dismissals and the cost of the redundancy procedure. For the most part, the proposal takes into consideration the previous recommendations of the White Paper on Labour Relations.

Strengthening the effectiveness of labour law

The proposal envisages various measures to assure compliance with the law: creating new sanctions (in relation to information rights); improving mechanisms for making complaints; creating a public record of labour offences; creating deterrent mechanisms in order to encourage the timely payment of  fines; and strengthening sanctions in the case of repeated labour offences.

Fighting segmentation and precariousness and promoting the quality of employment

These goals are addressed through measures which articulate the revision of labour legislation, the system of social protection and employment policy.

Labour legislation

In this domain, the proposal envisages the reformulation of the concept of dependent work in order to enable labour inspection and the judicial system to fight effectively against ‘fake independent work’; to limit fixed-term contracts to three years; to create a new form of open ended contract that is intermittent, which means that it allows a worker to work only a part of the year, but to maintain a permanent employment relationship; and to prohibit unpaid extra-curricular training.

Social Protection

The proposal focuses on changing employer social security contributions: employer taxation will be decreased by 1% for permanent workers and increased by 3% for workers on fixed-term contracts. Further, companies using services delivered by independent workers will be obliged to pay up to 5% of the social security contributions for these workers and the contributions of independent workers will be decreased by 2.4% (thus overall, independent worker contributions will be reduced by 7.4%).

Adaptation of employment policy

Employer contributions to social security will be amended as follows:

• if a contract with an independent worker is converted into an open-ended contract, in the case of workers older than 30, and when they are strongly economically dependent on the company or economic group, the employer social security contributions for this workers will be reduced by 50% over a period of three years. In the case of such workers under 30, employers will be exempt from social security contributions for these workers for three years;

• if an employer hires a young person on an open-ended contract who is under 30 who has completed secondary education or is following a training programme, the employer will be exempt from social security contributions for this person for three years;

• if an employer hires on an open-ended contract a person who has been long-term unemployed (defined as nine months of unemployment) and, exceptionally, a person who has been unemployed for more than six months, the employer will be exempt from social security contributions for these workers for three years;

• if an employer hires on an open-ended contract a worker older than 55 who has been unemployed for more than six months, the employer will be exempt from social security contributions for this person for three years; or, if an over-55-year-old is hired on a fixed-term contract, employer social security contributions for this worker will be reduced by 50% for up to three years.

Commentary

The proposed all-encompassing reform of labour relations, employment and social security represents a major challenge for the Portuguese labour relations and employment systems. It challenges the system of collective bargaining not only through issues such as adaptability of working time but also through a raft of further changes such as the possibility of setting out rules which are less favourable to the employees than the law, the period of validity and the expiry of collective agreements, representativeness criteria and the possibility of workplace negotiations without the direct presence of the trade unions. The proposed reform articulates some of the employer demands in the domain of working time flexibility and rationalisation of dismissal procedures and some of the trade union demands in relation to promoting open-ended contracts and combatting precariousness. Multiple trade-offs are at stake and there will now be a detailed and slow examination of the likely impacts of such far-reaching changes. Thus the coming process of tripartite negotiation will be one of the most complex ever seen.

Maria da Paz Campos Lima, Dinâmia